Eliminating The Sharks

Our Towns

Greater Hartford

May 13, 1999

Connecticut's House of Representatives gave needed protection to many small businesses in passing a bill that would place a cap on the interest rates that unlicensed lenders can charge customers. The Senate should follow suit.

The proposal would put an end to the exploitation of struggling small-business owners, often people of color. These ethnic grocers and merchants are vital cogs in the economies of municipalities such as Hartford, New Britain and Bridgeport.

In recent years, immigrants from the Caribbean and Latin America have been victimized by unscrupulous unlicensed lenders. These merchants, who have historically been denied credit by conventional lending institutions, have provided easy prey. The plight of small businesses from ``legal loan sharks'' was highlighted in a series last year in The Courant. The legal but obscene rates charged by these lenders, sometimes topping 50 percent, have been devastating to these merchants and their communities.

Steps will need to be taken to address the lack of mainstream financing that drives small merchants to these lenders. Meanwhile, the proposed bill will provide a crucial dose of prevention.

It will place a 17 percent cap, plus the state deposit index, on small lenders. The index is an approximate reflection of the inflation rate and is equal to the average savings deposit interest rate in Connecticut.

These parameters would close the loophole the state's banking deregulation created in 1981 when Connecticut removed the 18 percent rate cap on small-business loans. Conventional lenders would not be affected by the new law.

The Senate should join the House in removing this usurious obstacle to the American dream.